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June 14, 2012

You be the sentencing judge: what should "putrescent" Ponzi scheme R. Allen Stanford get?

The latest greatest notorious Ponzi schemer, R. Allen Stanford, is due to be sentenced in federal court in Houston today. Here are the basics and some sentencing predictions from this Bloomberg piece:

R. Allen Stanford, found guilty of leading a $7 billion international fraud scheme by a U.S. jury, will spend the rest of his life in prison if a federal judge grants prosecutors’ request.

Stanford, 62, will be sentenced today by U.S. District Judge David Hittner in Houston. Jurors in March convicted the Stanford Financial Group principal of 13 charges, including five counts of mail fraud and four of wire fraud, each punishable by as long as 20 years in prison.

Prosecutors asked for a 230-year term, the maximum under federal sentencing guidelines. Ali Fazel, one of Stanford’s lawyers, said the defense asked for a sentence of 31 to 44 months, based on a different, much-lower calculation of investors’ losses. Prosecutors contended that such a sentence was tantamount to “time served” for Stanford, who has been in custody since June 2009.

A sentence of about 30 years is more likely, according to Douglas Burns, a New York criminal defense lawyer. “This isn’t the Madoff case,” Burns said, referring to Bernard Madoff, the New York financier who received a 150-year term for a Ponzi scheme that bilked investors of more than twice as much money as Stanford’s victims. “This doesn’t seem to be at the same level.”

Stanford’s jury found he lied to buyers of certificates of deposit issued by his Antigua-based Stanford International Bank Ltd. and sold in the U.S. by his Houston-based securities firm, Stanford Group Co.... “Robert Allen Stanford is a ruthless predator responsible for one of the most egregious frauds in history,” the Justice Department said in its 34-page filing on June 6....

Barry Pollack, Washington criminal defense lawyer, said the government’s recommendation is inappropriate for a symbolic sentence. Stanford would be 77 if he served 15 years and would be unlikely to commit crimes after being released, Pollack said. “It’s hard to take a request for a 230-year sentence seriously,” Pollack said yesterday in a telephone interview.

Burns, a former federal prosecutor, agreed. “The government, I think, is not looking for this 230-year sentence,” he said. Given Stanford’s age, “a life sentence approximates 25 years.”

U.S. District Judge Denny Chin was under “unbelievable pressure” when he sentenced Madoff in 2009, Burns said, adding he doubted Hittner would mete out a comparable punishment. “I don’t think he’s going to give him a Bernie Madoff-like sentence because I don’t think the case is viewed like the Madoff case,” he said. A 12 1/2-year sentence would fairly and severely punish the financier, he said.

Thomas Petters, 54, a Minnesota businessman found guilty of orchestrating a $3.5 billion fraud in Dec. 2009, received a 50- year prison term. Galleon Group LLC co-founder Raj Rajaratnam last year was sentenced to 11 years for insider trading. He will be 55 tomorrow. Enron Corp. Chief Executive Officer Jeffrey Skilling, found guilty of both fraud and insider trading at the world’s biggest energy trading company, got a 24-year term in 2006. He is now 58....

More than 300 victims’ letters have been received by the court. Two fraud victims will address the judge before the financier is punished, according to court papers. “Madoff may go down in history for operating the world’s biggest Ponzi scheme, but I hope Judge David Hittner gives Allen Stanford the ‘bragging rights’ he deserves for operating the world’s most criminal Ponzi scheme,” victims advocate Angela Shaw said in an e-mailed statement. “His actions have ruined thousands of lives, for which he has shown no remorse.”

The evocative adjective "putrescent" comes from a line in the Government's quite compelling sentencing memo (available here), which does quite a nice job painting a picture of Stanford as even worse that Bernie Madoff. That memo, as well as the fact that Stanford went to trial and seems to have lived even more lavishly than Madoff with his ill-gotten gains, leads me to think Stanford may ultimately get a sentence closer to the 230 years recommended by the feds than the merely 30+ months sought by the defense (which seems almost as kooky and silly as the prosecutors' recommendation).

If I were the judge, I would probably would be going into today sentencing hearing with an eye toward a prison term set somewhere between 50 and 100 years. There is no magic in that recommendation, but I do think a fraudster of Stanford's status has earned himself a sentence that leaves him with no prospect of ever leaving prison alive.

Comments

If I were a victim of his ponzi scheme, I would find it far more satisfying to recover whatever I may from his estate and let him walk free. There will be a consolation for him that he will be safely esconced in prison for the rest of his life safe from the wrath of his victims. Far better that he spend the rest of his days slinging hash in the back of a greasy spoon, his wages and accounts garnished, and constantly having to check over his shoulder every time he walks home.

Of course this case was never about Stanford or about the victims, it was about the government scoring points by being tough on a guy who perpetrates the same act as the government does with Social Security and Medicare.

Posted by: Jardinero1 | Jun 14, 2012 10:49:13 AM

the only time they go after ponzi schemers like this is when the ones being scammed were well off to begin with, if it were just a bunch of joe blows being ripped off you'd never see anything like this happening

Posted by: Greg | Jun 14, 2012 2:04:34 PM

I agree with you Greg. As an example of what you refer to, the fastest growing, as well as the most prevalent crime in the USA is identity theft. It costs the economy untold billions per year and destroys faith in the financial system. Its victims are nearly always the little people. This is the perfect crime for the feds to pursue since it nearly always involves the mail, the phones, the internet and crosses state lines. Yet, how much money is spent pursuing the perps of identity theft? Damn near zero.

Boy, they sure nailed Stanford though. I will sleep better tonight, knowing he will never again be able to prey upon rich old widows and their idiot sons.

Posted by: Jardinero1 | Jun 14, 2012 3:16:25 PM

'he will never again be able to prey upon rich old widows and their idiot sons.'

lol, I like that one but it probably does contain more truth than fiction in it

Posted by: Greg | Jun 14, 2012 4:36:09 PM

Jardinero1 --

"Far better that he spend the rest of his days slinging hash in the back of a greasy spoon, his wages and accounts garnished, and constantly having to check over his shoulder every time he walks home."

The tenor of what you say suggests that you'd prefer no criminal punishment at all, is that correct? If it is, even 90 days would be too much. Do you have an estimate of what percentage of the electorate would agree that 90 days would be too much?

And at age 62, the "rest of his days slinging hash" would produce essentially zero percent of the amount he fleeced, giving his victims next to nothing. It's one thing to support restitution over jail when the restitution could amount to something, and another to support it in a case like this, where it would amount to the next bitter joke on his victims.

P.S. Is it OK to exploit other people's stupidity to enrich yourself? If so, perhaps it would be more forthcoming to say so explicitly.

Posted by: Bill Otis | Jun 14, 2012 8:03:43 PM

Mr Otis,

My comment alluded to Stanford's bleak prospects outside of prison and the strong chance of vigilante justice prevailing were he turned loose. He will be happier, healthier and safer in prison rather than on the street. Thus, I would rather see him on the street instead of in jail. I, for one, see the occasional virtue in vigilante justice as long as the guilt of the perp is not in doubt. Such justice has great strength in maintaining societal norms. Regrettably, that means both the good norms and the bad ones.

Posted by: Jardinero1 | Jun 14, 2012 11:44:57 PM

I will relate a personal anecdote which explains some of my cynicism about the Stanford case in particular.

Back when I was still in the brokerage business, in Houston, our office was subject to an annual compliance audit. Year after year it was usually the flacks from corporate who came in to audit us. But I think it was 2008 or 2009, when we were selected for the random audit by the FINRA auditors. Anyway, they come in, and spend a day going through our files looking for errors and omissions. Then they gather us all in the conference room to give us their results. It's all bullshit. There is the occasional missing disclosure or the missing signature from a form or disclosure.

All they found on me was a missing signature on a mutual fund prospectus receipt from three years before. They lecture me about how important it is to get the client to sign the receipt to protect both the client and myself. I nod politely and say lesson learned. Right then, one of the auditor's phone rings, then the other's, then they talk feverishly to one another, pack their shit, say thank you very much, and sprint out the door. We all sat there mystified. We were wondering if there was a fire in the building. Then we find out in the news that Stanford had been arrested that day. We figured they must have run out to go to his office or something.

So anyway, that tells you something about FINRA. They hector me and my cohorts about a missing signature from three years ago while Stanford bilked billions from so-called sophisticated investors just a couple miles away.

Posted by: Jardinero1 | Jun 15, 2012 12:04:10 AM

Jardinero1 --

The problem with vigilante "justice" is that those most likely to administer it are those least likely to have given the matter the dispassionate, not-personally-involved and independent thought that is generally and correctly regarded as indispensable to actual justice.

There is an element of pay-back in justice,to be sure. There are those commenting on this site who condemn retribution as a component is handing out justice, but I am not among them. Vigilantism, however, takes it too far.

Posted by: Bill Otis | Jun 15, 2012 8:02:11 AM

Mr. Otis,

I know many cops and several prosecutors and I note that the problem with government dispensed "justice" is that those most likely to administer it are not likely to have given the matter the dispassionate, not-personally-involved and independent thought that is generally and correctly regarded as indispensable to actual justice. Government dispensed justice consists of flacks blindly doing their jobs without any consideration of justice or the consequences of their actions.

I would cite the war on drugs as the foremost example of the above. DWI's are another example. Sex offender laws another example. Stanford's requested sentence of 200 years as another example. Three strikes laws another example. Minimum sentencing laws another example. The ongoing case against Martin Zimmerman another example... Ad infinitum.

Posted by: Jardinero1 | Jun 15, 2012 9:50:37 AM

Jardeniro1 --

Prosecutors are not supposed to be dispassionate. They are supposed to be advocates, albeit within the rules and (unlike defense counsel) not to serve any individual client come hell or high water.

Judges are supposed to be dispassionate, in the sense of not having a personal stake in the result of any particular case. In my experience (mostly federal appellate), overwhelmingly they meet this standard. Vigilantes never do.

It is Congress or the state legislatures that have enacted almost all of the statutes to which you object. It is scarcely the job of subordinates like cops or prosecutors to nullify the legislature's work by refusing to enforce the laws they swore to uphold. If the laws are to be nullified, it is up to the electoral/political process to do so.

But for however that may be, the list of laws to which you object seems problematic. Drug laws are controversial to the extent they include pot, but there is overwhelming support for continuing the criminal ban on the harder drugs. DWI is dangerous, and over the last generation, as more DWI laws have been enforced with at least modest jail time, the number of traffic fatalities has plummeted. This is a poor time to be attacking sex offender laws, what with the ongoing Jerry Sandusky trial, involving a years-long pattern of forcible boy rape. If you oppose sending Sandusky to jail (where he is headed, probably and justifiably for life), my guess is that you'll be alone, even on this defense-oriented forum.

I don't know whether Zimmerman is guilty, and the media's coverage of that case has been appalling in its deceptive and anti-Zimmerman slant. But there is certainly enough to take the case to trial.

Posted by: Bill Otis | Jun 15, 2012 6:26:26 PM

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